Charter Hall ‘considering’ David Jones properties

One potential contender could be the property interests of Brett Blundy, who listed the Aventus Group, which owns large format retail stores. Photographer: Liam Kidston

Charter Hall appears to be gathering further momentum when it comes to acquisitions, with the $5.71bn real estate group understood to be in the mix to buy the David Jones properties.

The department store David Jones has been running a sale process for the real estate of its central business district stores in Sydney and Melbourne through investment bank UBS.

Already, David Jones has netted $120m for one of its central city Melbourne sites on 299 Bourke St, but is also looking to divest the other premier retail trading site at 310 Bourke Street along with the Sydney site on Elizabeth St.

Charter Hall is lining up at a time that at least one other listed group and wealthy private family are believed to be in the mix for the properties that are expected to sell collectively for a price somewhere between $500m and $1bn, as revealed by DataRoom on Tuesday.

One party believed to be bidding is Shaun Bonett’s Precision Group, while other wealthy privates such as Sam Alter are also typical investors when it comes to the assets on offer.

The David Jones process is well underway, with first round bids due on Wednesday.

The lease terms for David Jones are expected to be the key to any deal. It is battling challenging trading conditions linked to COVID-19 and digital disruption.

However, some suspect that the leases could be guaranteed to any buyer for a number of years by the South African parent company Woolworths.

Market analysts believe that any buyer would want the department store to pay rent of 7 per cent of sales, or about $15m-$20m annually, but most believe that rental payments of 5 per are more realistic.

The funds will enable David Jones’ parent company to pay down its debt load.

Earlier this year, it was straddled with at least $400m of debt across its Australian operations, which includes the Country Road Group.

Woolworths South Africa bought David Jones in a $2.1bn takeover during 2014 but has since written down the business by more than $1bn.

The department store has already offloaded other properties to free up cash, selling its Market Street “men’s store” building in Sydney’s CBD to Westfield owner Scentre and Cbus Property for $360m in 2016, with the $200m of funds used to overhaul the Elizabeth St site.

Meanwhile, Charter Hall has been on a spending spree in the past financial year, with its funds under management growing 33.2 per cent to $40.5bn.

While delivering its results, Charter Hall said it had $5bn of firepower to take on fresh transactions at a time when some rival property groups were looking to sell assets or companies need to unlock their balance sheet assets.

It has embarked on a number of sale and lease back transactions with companies such as Owens-Illinois and Ampol, recently outlaying $682m for a stake in its petrol station sites with partner GIC.

It has also acquired portfolios from other companies such as Telstra and Qube.

In the past year, Charter Hall has also bought a Sydney tower overlooking Hyde Park on Elizabeth Street for $630m and has also gained control of the city’s landmark Chifley Tower and Plaza with its backers in a $1.8bn transaction.

Last year, Charter Hall made a takeover bid for the Australian Unity Office Fund and it remains in the running to buy Qube’s logistics park in Sydney’s Moorebank that could be worth up to $2bn.